Samsung Electronics are to cut memory chip production "by a meaningful level" following an estimated 96% drop in its quarterly operating profit.
The tech giant said preliminary numbers showed operating profits fell by around £366 million January-March, blaming a drop in sales on a slow global economy and a lower demand since the COVID-19 pandemic.
They said in a statement: "We are lowering the production of memory chips by a meaningful level, especially that of products with supply secured."
Despite the announcement, the firm's shares rose more than 4%.
The COVID-19 pandemic saw a surge in demand for memory chips as consumers bought new electronics to use when ordered to stay at home during lockdown and following a chip shortage over the last few years, many manufacturers are struggling to find a balance between current demand and their inventories.
Analyst Peter Hanbury told BBC News: "When the overall economy slowed down, suddenly the demand for these end products slowed. So, the makers of these end products stopped ordering chips and focused on selling through the inventory they already had."
But investors are hopeful Samsung's announcement will prove to be a sign of market recovery in the industry.
Peter added: "We expect this inventory 'digestion' phase to complete its course over the next 3-6 months. At that point, the end markets will have worked through their inventory and returned to a more normal purchasing pattern."
